[blackwasp]

US President Donald Trump has threatened to impose a 20 to 25 percent tariff on cars imported from the European Union (EU). The move comes after the government launched an investigation into the effects of auto imports on the country's national security. It was also revealed via a tweet that the study was almost complete.

The Alliance of Automobile Manufacturers will be filing a written comment on the proposed tariff on car imports. The group represents carmakers like General Motors Co, Toyota Motor Corp, Volkswagen AG and others.

At present, the US imposes a 2.5 percent tariff on cars imported from Europe and a 25 percent tariff on pick-up trucks. The EU meanwhile levies a 10 percent tariff on all cars imported from the USA.

The automakers have warned that the higher tax could cause an increase of US $5,800 per car on an average and a total of US $45 billion annually. Based on the 2017 car sales numbers, the move could wipe out the tax benefits currently availed on cars.



Source: Reuters

[aniyo]

So interesting, A country that stood for free trade (Read my monopoly) is now advocating tariff wars with many nations. Well the higher tax in India has ensured few of home grown companies have managed to get big on the manufacturing scene. On the flip side we never get the good cars Europe enjoys.
The only reason I like Trump is, he is the only politician who is standing by the promise he made before elections.

[SmartCat]

Bad for Jaguar Land Rover (and hence Tata Motors) if Trump acts on his threat.

Originally Posted by blackwasp

At present, the US imposes a 2.5 percent tariff on cars imported from Europe. The EU meanwhile levies a 10 percent tariff on all cars imported from the USA.

Increasing tariff from 2.5% to 10% on cars imported from EU seems fair then.

[blackwasp]

Originally Posted by smartcat

Increasing tariff from 2.5% to 10% on cars imported from EU seems fair then.

I think this older report should highlight the volume difference between them.







Further, despite the popularity of EU cars in USA, the Americans love their trucks and many of those are built in North America.

US consumers continue to buy NAFTA made cars, which accounted for 79% of the total for the quarter.

And most of the Americans exports are cars built by the Germans in the US factories!!

Source: Jato

[Turbanator]

It's a matter of time before these Tariffs are put in place and I will support Trump here. BMW had plans of opening a large factory in Mexico in 2019, let's see what happens.

I think Japanese are better prepared, Toyota produces most of their models in USA or Canada but will have to think about Lexus if the Tariffs go beyond Europe. This should also put the focus on other markets like India for many companies which were happy in the USA otherwise.

Besides the Tariff on new Cars, there will be Tariffs on the components these companies import

Quote.
The tariff wouldn’t affect only the cars imported in the US but it would also affect the price of car parts brought into the US for manufacturing certain models as well. The biggest plant BMW has in the world right now is located in Spartanburg, South Carolina, specialized in making only SUVs and being responsible for about 450,000 units a year. BMW imports a number of components to make their cars there, from engines to certain electronics which are made in Europe and shipped over. The new tariffs would raise their prices by 25 percent, leading to a serious price hike overall.

https://www.bmwblog.com/2018/06/26/b...-tariff-plans/

[GTO]

Originally Posted by Turbanator

It's a matter of time before these Tariffs are put in place and I will support Trump here.

Likewise. I'm a believer of the 'if you want to sell it here, build it here' philosophy. Of course, it's a different matter if the market is too small (e.g. Pakistan) or it doesn't make sense (e.g. Australia), but the USA is the world's 2nd largest car market. The volumes are mind-boggling. Nearly all car brands who sell in the USA already have factories there; it's just a matter of expansion.

[ani_meher]

The more I read about the absurd multiple times tax charged on US exports than imports, the more I wonder how can people blame Trump for trying to protect his country's income?

There is a wide disparity in taxes on motorcycles exported to US from India vs imported to India as well. This one sides taxation has to end sometime.

[SmartCat]

Originally Posted by ani_meher

The more I read about the absurd multiple times tax charged on US exports than imports, the more I wonder how can people blame Trump for trying to protect his country's income?

Once a politician or leader is caricaturized, every controversial decision made by that person appears wrong.

Also, Trump's approach is a bit unorthodox. I think he hopes that such financial shock and awe tactics will give USA an upper hand in trade negotiations. Trump's approval rating (specifically with respect to economy) is shooting up and is now at 51 percent. Only 36% disapprove.
https://www.cnbc.com/2018/06/25/majo...e-economy.html

In geo-politics, such tactics seems to have worked with respect to North Korea.

[AltoLXI]

Originally Posted by smartcat

In geo-politics, such tactics seems to have worked with respect to North Korea.

Still too early to say.

https://www.washingtonpost.com/news/...=.d2f5095022b0

Over the weekend, separate reports citing U.S. officials seemed to confirm what so many experts have long feared — that despite the overtures and sunny proclamations made at the Singapore summit between President Trump and North Korean leader Kim Jong Un, Pyongyang probably has little interest in dismantling its nuclear program.

https://www.bbc.com/news/world-asia-44679144

Reports that North Korea is continuing its weapons programme, despite pledges to denuclearise, have cast doubt on its sincerity in peace talks.

[Cesc]

German cars sell in the US not because they are cheap - they sell because they are better. Imposing higher tariffs won't suddenly revitalize Detroit or give more jobs to Americans. In all likelihood it will only impact the end price for the American consumer. People wanting to buy an Audi/BMW/Mercedes won't suddenly start lining up for Lincolns or Cadillacs.

Sadly this kind of reasoning is lost on Trump voters. Whatever he has done hasn't helped his core voter base economically - it has helped his campaign donors though. The tax cuts have helped the rich more than the poor and corporations more than consumers (the very people who funded his campaign).

There is no increase in coal/iron and steel/manufacturing jobs - a sector which voted heavily for Trump - and there isn't likely to be any from imposing these tariffs.

The whole North Korea thing is a sham - nothing came out of that summit and probably Kim is having the laugh of his life.

Of course there are/will be more conservative justices in the US Supreme court now and abortion may soon become even more difficult - if not downright impossible -in the US. That's some victory isn't it?

[SmartCat]

Originally Posted by Cesc

German cars sell in the US not because they are cheap - they sell because they are better. Imposing higher tariffs won't suddenly revitalize Detroit or give more jobs to Americans. In all likelihood it will only impact the end price for the American consumer. People wanting to buy an Audi/BMW/Mercedes won't suddenly start lining up for Lincolns or Cadillacs.

You misunderstand. Trump is not trying to get the Americans to buy Cadillacs. Trump Tariff Tantrums have two objectives:

1) Get Europe to slash tariffs so that Toyota/Ford/GM/ Nissan can export made-in-USA cars to Europe and/or
2) Impose tariffs on made-in-Europe cars (from all brands) so that it incentivizes them to setup an assembly line in the United States.

[Cesc]

I think the likes of Toyota and Nissan have more export hubs for Europe than using a high expense labor market like US. Ford and GM are making a good portion of there cars outside US as well. Heck even Audi has a plant in Mexico which they use heavily for the US market.

The Ford Mustang has shown that if you make a compelling product then it will sell even in Germany! 10% is hardly a make or break barrier for good products.

Re. assembly lines for German manufacturers in US - BMW probably has their biggest assembly line in North Carolina. Mercedes C class is 70% US made - including components.

Since these proposed tariffs affect components as well, its not just German cars that will become expensive. Toyota has come on record saying the Camry will start costing $1,800 more if these tariffs come into affect. The whole car industry is not going to shift to US to avoid these tariffs. Which is why IMO manufacturers will absorb some and pass on some price hikes. I do not think the status quo will change much but then I may be mistaken.

[volkman10]

German Chancellor Angela Merkel would back lowering European Union tariffs on U.S. car imports, responding to an offer from Washington to abandon threatened levies on European cars in return for concessions.

The U.S. ambassador to Germany, Richard Grenell had mentioned to the executives that Trump could abandon his threats if the EU scrapped duties on U.S. cars imported into the bloc.

German automotive trade body VDA said any suggestions about mutually removing tariffs and other trade barriers were positive signals.

"But it is clear that the negotiations are exclusively being held at a political level

Link

[Samurai]

Trump doesn't make policy by studying the market conditions. He makes up slogans and buzzwords, and that becomes his policy. And his policy execution basically resembles throwing a firecracker in a room full of people and watch the ensuing chaos. His policies are mainly about getting out international agreements made over years with meticulous details. He got USA out of TPP and Climate accord, and is now threatening get out of NATO, NAFTA and WTO.

So I would disagree with the above trump policy simply because no thought has gone into it. He just made it up because it sounds good to his base.

If this tariff helps US automakers, why are they opposing it?

Building everything in USA sounds good, but isn't practical. If you try to build everything within the country, it will be too expensive and nobody can afford your product. I mentioned the following in another thread while discussing customs policy:

Originally Posted by Samurai

We live in a global economy where any product consists of components from multiple countries. But our customs department still labours under the assumption that any imports are bad. Why is this important? Any new research is not done from scratch, but it is built upon existing technology. If you want to create new technology, you need best of equipment, and best of components. If you are in business friendly country like US or Singapore, you can source equipment from various countries within days and go about your job.

Trump's own economic adviser admitted that tariffs will hurt US economy. It can't get comical than that.

[SmartCat]

Originally Posted by Samurai

If this tariff helps US automakers, why are they opposing it?

As I mentioned before, this is not about "helping US automakers". It is about setting up automobile factories in US. Automobile brand from any country is fine, as long as the factory is in the United States.
https://www.nasdaq.com/article/trump...arley-cm987033

The reason why all automobile manufacturers are opposing tariff war is because it totally messes up their capex plans, including new model launches.

Building everything in USA sounds good, but isn't practical. If you try to build everything within the country, it will be too expensive and nobody can afford your product.

The idea is not to "build everything" in United States. His policies are about reciprocity - in this case, lowering of EU tariffs on US car imports. And it seems to be working:

Merkel says would back cutting EU tariffs on U.S. car imports
https://uk.reuters.com/article/us-us...-idUKKBN1JV13R